Annual report pursuant to Section 13 and 15(d)

Property And Equipment, Net

Property And Equipment, Net

12 Months Ended

Dec. 31, 2012

Property and equipment at December 31, 2012 and 2011 are as follows:

	2012		2011

Equipment & Installation	$	717,918	$	1,547,559
Office equipment		23,941		23,941
Computer equipment		11,985		11,985
Total Equipment		753,844		1,583,485

Less: accumulated depreciation		410,260		16,788
Property and equipment, net	$	343,584	$	1,566,697

As part of the reverse merger, the Company acquired office equipment with a fair value of $5,706. The Company uses the straight-line method of depreciation over 3 to 10 years. During the year ended December 31, 2011, the Company installed equipment with a total cost of $1,499,080 at the site of its first commercial customer in Centralia, Washington. This equipment is subject to a bargain purchase option on January 1st, 2015 and the Company also bears the cost of asset retirement at the end of the commercial contract should the customer not exercise the purchase option. The Company believes that if required to retire, the scrap value of the equipment would offset the cost of removal. During the years ended December 31, 2012 and 2011, depreciation expense charged to operations was $411,853 and $16,743, respectively. Due to theshort-term idling of both power units at the Company’s commercial customer, the Company recorded an impairment charge of $400,000 againstthe value of the equipment in the quarter ended March 31, 2012. The Company recorded an additional impairment charge of $400,000 in the quarter ended December 31, 2012 after further review of the expected revenues from the customer prior to the bargain purchase option date of January 1, 2015.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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